Wednesday October 20, 2010 - 19:49:06 GMT
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U.S. Dollar under Pressure; Medley Report Outlines Fed QE Plan
A report from Medley Global Advisors
outlining the Federal Reserveâ€™s plan to buy $500 billion of Treasury debt over
six months to stimulate the economy is helping to pressure the U.S. Dollar at
The Greenback began accelerating to the
downside last night after Medleyâ€™s confirmed comments made Tuesday by a Fed
official that $100 billion a month in bond purchases may be appropriate to
sustain the U.S.
economyâ€™s feeble recovery.
Medleyâ€™s report gave traders the green
light to resume selling the Dollar as it clearly indicated the Fed was getting
ready to start pumping money into the economy as soon as November.
Since last Friday, the Dollar had
strengthened because of short-covering as many traders lifted bearish positions
on the thought that perhaps they had over-estimated the size of the Fedâ€™s
commitment to its new quantitative easing program.
The Euro is a big gainer at the
mid-session, boosted by the Medley report as traders entered new long positions
in anticipation of the Fed easing. In addition to the Fedâ€™s new commitment to
restoring the strength of the economy, speculators bought the Euro on the
thought that the European Central Bank may be getting ready to implement a tighter
Although the Euro is strong at the
mid-session, gains could be limited because of this weekâ€™s G-20 meeting. In addition, some traders still believe the
Dollar is oversold.
Euro changed the main trend to down when it crossed 1.3775 on Tuesday.
Short-term oversold conditions prevailed however setting up the possibility of
a 50% correction of the break from the top at 1.4159. This means that 1.3928 to
1.3983 is the next potential upside target.
On the downside, overnight the market
penetrated, but regained a major uptrending Gann angle at 1.3764. If the Euro
is topping, then it is likely to fail between 1.3928 to 1.3983 within the next
2 to 3 days.
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